Burning issues on GAS tenders

Questions have been raised as to why the Ministry of Public Enterprise Development is silent over Litro Gas Lanka’s alleged failure to follow government procurement guidelines in the Liquid Petroleum Gas (LPG) purchase.

The Technical Evaluation Committee [TEC] appointed by the Department of Public Finance and Treasury to evaluate the LPG purchase is now being questioned on how vital requirements seeking from the prospective bidders have been ignored in order to award the tender only to a selected bidder.

Tenders were called from international bidders in May this year for the supply of 300, 000 MT of LPG to Litro Gas Lanka Limited for 2017/2018. The lowest bidder was M/s. Oman Trading International Ltd., which is a fully-owned subsidiary of the Government of Oman, and the second lowest bidder was M/s. Shell International Eastern Trading Company and the other selected bidders were M/s. Vitol Asia (Pvt) Ltd., M/s. BB Energy (Asia) Pvt Ltd., and M/s Maruti Energy DMCC.

The methodology the TEC followed from the time the bids were opened has raised several questions on the sequence of events that took place.

On what basis the TEC rank the bidders and brought Shell International as number one. We do not see any faults with the SCAPC members or with the Cabinet of Ministers but solely with the TEC

The Oman-based company’s price quote to supply LPG was US$ 48 per MT while Shell quoted US$ 49. In order to offer the tender to Shell International Eastern Trading - without informing the lowest bidder - the TEC had given Shell International another opportunity to negotiate their price which had led them to bring down by US $ 1.50 to US$ 47.50 per MT. However, the Oman Trading had never been asked to negotiate their price.

Although Oman Trading complied with all the requirements Litro Gas has sought in their tender document, by letter dated July 31, 2017 Secretary Ministry of Public Enterprise Development Ravindra Hewavitharana had informed Oman Trading, Vitol Asia, BB Energy and Maruti Energy that the Standing Cabinet Appointed Procurement Committee (SCAPC) has recommended the award of the above tender to the (technically responsive bidder) Shell International Eastern Trading.

The letter further states as thus, ‘If there are any representations/ appeals to be made against the above determination, you are kindly advised to make them in writing to the Chairman Procurement Appeal Board, the Presidential Secretariat Colombo 1, with a copy to the Secretary, Ministry of Public Enterprise Development along with all the materials required to support your appeal. This intimation is issued to you in terms of Sections 8.3 of the Government Procurement Guidelines 2006’.

“According to Oman Trading, they were surprised when they received the letter as they were never informed that their application was rejected though they were the lowest bidder,” sources said.
According to the sources, had Oman Trading been given an opportunity to negotiate the prices, they were willing to give a further lower price to supply LPG.

“If Shell International could bring down the price by US $ 1.50 per MT, we were told that Oman Trading too would have given a better price than Shell,” sources alleged.

The question arises as to why the Ministry of Public Enterprise Development is silent over this matter. The subject minister Kabir Hashim promised at a press conference that he will take action against the members of the TEC, if found guilty of violating government procurement guidelines and if there’s any wrongdoing involved in offering the tender.

The reason given by the TEC to SCAPC to select the second lowest bidder disqualifying the lowest bidder was due to shortcomings and non-compliance in vital aspects during their tenure of LPG supply to Litro Gas. According to the sources who wished to remain anonymous, Shell International Trading too had to pay a penalty for having shortcomings and non-compliance in vital aspects during their tenure of LPG supply.

“According to the TEC selection criteria, Oman Trading International’s efficiency is not satisfactory and the number of vessels they have to supply LPG is very much lower than that of Shell International whose efficiency is satisfactory and have supplied LPG to Litro with no records of stock out situations. Although their claim is as such, in the event the government to government negotiations succeeded between Sri Lanka and Oman, Litro would have purchased from Oman Trading leaving aside all their past records and even the number of vessels they have taken up as an issue. Earlier Oman Trading was managed by another company and now it is a company owned by the Government of Oman,” sources added.

We wanted them to know their prices to supply gas, their price was US $ 65 per MT which was higher than the price we quoted at that time. Therefore, we requested them to take part in the tender and their bidding price was US$ 48

Speaking on conditions of anonymity, a senior officer at Litro Gas levelled allegations for disqualifying the lowest bidder claiming that past records cannot be considered after lifting the one year ban on Oman Trading. “If Oman Trading was blacklisted, it was due to their faults. What was the reason to lift the ban? Once the ban was lifted, they have to forget the past records and take them back to the system. Having lifted the ban and once again talking about their earlier mistakes cannot be justified. On what basis the TEC rank the bidders and brought Shell International as number one. We do not see any faults with the SCAPC members or with the Cabinet of Ministers but solely with the TEC,” sources said.

Meanwhile, according to Litro Gas Board Minutes (of August 17, 2017), this paper is in possession, former Director Litro Gas Aruna Siriwardena had raised many questions from the Board in regard to the tender procedure.

Refuting allegations, Ministry Secretary Ravindra Hewavitharana said that there was no scam involved in the tender and added that the entire procurement process followed by Litro Gas and the recommendations made by the SCAPC was transparent.

Although the Ministry Secretary said that Litro Gas Lanka was not happy for the Ministry decision to lift the ban imposed on Oman Trading, this newspaper is in possession of a letter dated May 16, 2017 sent by Executive Chairman Litro Gas, N.M.S. Moonasinghe to the Sultan of Oman Talal bin Salim Al Jabri allowing them to participate in the tender. The letter further states as thus, ‘Dear Sir, With reference to your e-mail dated May 15, 2017 at 22.20 (GMT+05.30), you will be able to participate at the tender (Ref: LGLL/ LPG/082-IMP/2017) as per the decision taken by the Board. Please send your representative to collect the tender documents as per the published advertisement’.

When asked whether TEC informed the SCAPC how Shell too had to pay a penalty in the guise of an additional duty, Hewawitharana said that he was not aware of it and added that the TEC would have done it purposely.

“Under this ministry we are dealing with about 90 institutions. We are busy and have no time to go through each and every detail. Proper recommendations should come from the TEC as we have to trust them. In the event if wrong details are provided it is their fault,” Hewawitharana said.

When contacted the CEO of Union Development and Investment [Pvt] Ltd., Murugesh Devanayagam, the Local Agent for Oman Trading, said that he did not want to make any comment.

Managing Director Litro Gas Muditha Peiris and Finance Director Lakmali Hapuarachchi told this newspaper that the allegations that have been levelled against awarding the tender were baseless and added that every step carried out before and after the tender had been done transparently.

Since there are allegations against the TEC members representing Litro Gas Lanka for violating the government procurement guidelines, when asked who nominated the three Litro Gas officers, Peiris said that they were chosen by the Department of Public Finance and Treasury. Although specifically asked whether Litro Gas Lanka had sent the names to the Ministry of Public Enterprise Development to be forwarded to the Department of Public Finance, Peiris said it was the Ministry that had sent out the list of names they have.

Peiris further said as to why tenders were called to purchase despite letters exchanged by Oil and Gas Minister of Oman to Minister Kabir Hashim to supply LPG on a long term basis under a sovereign agreement between the two countries.

According to the TEC selection criteria, Oman Trading International’s efficiency is not satisfactory and the number of vessels they have to supply LPG is very much lower than that of Shell International, whose efficiency is satisfactory

“We wanted them to know their prices to supply gas, their price was US $ 65 per MT which was higher than the price we quoted at that time. Therefore, we requested them to take part in the tender and their bidding price was US$ 48. All decisions were taken by the SCAPC after the TEC reports were submitted to them,” Peiris added.

When asked whether former Board Member Aruna Siriwardena raised questions regarding the tender procedure followed by the TEC at the Board Meeting held on August 17, and that allegations were levelled for not providing the necessary documents to the Board Members, Peiris said that although certain matters were raised at the board meeting once all the necessary documents were given, Siriwardena’s concurrence was given not only to extend the gas supply to the country to the existing supplier but also to award the tender to supply LPG for 2017/2018 to Shell International as well.

Rejecting Peiris’ claim of giving his concurrence to award the tender to Shell International, former Director Aruna Siriwardena told the Daily Mirror that he never signed any document to give his consent to the said tender.

“I categorically reject the statement made by Muditha Peris that I gave my concurrence to offer the tender to Shell International. In order to extend the period by one month to supply LPG to the country, I gave my consent only after I spoke to Dr. B. M. S. Batagoda (Chairman SCAPC) on his mobile in front of the Board Members at the board meeting when I was told that he agreed to the one month extension,” Siriwardena added.

However, he declined to make any comment in regard to the tender procedure and wanted to go through the Board minutes if more information are needed.

Ban lifted on blacklisted supplier after this govt. came to power - Hewawitharana

Public Enterprise Development Ministry Secretary Ravindra Hewawitharana when contacted said that it was due to the failure to supply gas on time by the lowest bidder during their tenure of supply on earlier occasions that made the TEC to reject Oman Trading application.

Ministry Secretary Hewavitharana said the reason why Oman Trading was not given an opportunity to negotiate their price was due to their earlier track record. “Oman Trading was blacklisted earlier but when the Oman Minister made a request to Minister Kabir Hashim that they would like to supply LPG to Sri Lanka on a government to government basis, our Minister had asked them to offer a price at which they could supply gas.

The price given at that stage was above the market price. However at the tender they gave a lower rate. Since the Oman price was above the market price, the SCAPC did not ask them to negotiate the prices and made a request only to Shell which they reduced by US $1.50 which was less than Oman Trading,” Hewavitharana said.

According to Hewavitharana, the main reason to reject Oman Trading was their failure to supply gas consistently due to lack of enough vessels and added had the tender was awarded to them, it takes 10 to 13 days to supply the gas whereas Shell International takes only three days since they bring the gas from Maldives.

When asked what would have happened if the Government to Government negotiations were successful and if so whether Oman Trading would have rejected this time too, Hewavitharana did not comment.

Litro Gas Lanka was not happy for lifting the ban. Considering the past records, the TEC said that they will not recommend Oman Trading

In regard to non-offering the tender to the lowest bidder, he said that the TEC was seriously considered about Oman Trading’s failure to supply LPG on several occasions earlier and added the SCAPC decided not to award the tender to an irresponsible party. “Once they were blacklisted but later once this government came into power it was lifted. Government of Oman made a special request to the Minister that they are ready to supply LPG to Sri Lanka. Litro Gas Lanka was not happy for lifting the ban. Considering the past records, the TEC said that they would not recommend Oman Trading,” Hewavitharana said